Unfairly sacked workers can claim damages for psychiatric injury after High Court ruling

Unfairly sacked workers can now claim compensation for psychiatric injury after the High Court overturned a 115-year-old legal precedent on Wednesday.

In a 6-1 verdict, Vision Australia was ordered to pay $1.4 million to Adam Elisha, who was fired after a misconduct allegation was upheld in an internal disciplinary process that a Victorian Supreme Court judge labelled “a sham and a disgrace”.

The High Court of Australia revealed the judgment on Wednesday. Credit: Alex Ellinghausen

The Victorian Court of Appeal then overturned the initial court’s judgment based on the precedent of Addis v Gramophone Company Ltd – a case the United Kingdom’s House of Lords decided in 1909 when Australia was within its jurisdiction.

However, the High Court of Australia set aside the Victorian appeal court’s decision and upheld Elisha’s appeal, reinstating the initial verdict.

Clayton Utz partner Saul Harben said the Addis case meant Australians had been unable to recover damages for psychiatric injury connected to their wrongful termination for years. He added that it was decided at a time when society was more accepting of employment being a master-servant relationship.

“What the court’s effectively recognising now is that society has moved on,” Harben said.

“There’s greater equality between the parties, and employers need to be really prudent about how they go about terminating the employment relationship.”

Chief Justice Stephen Gageler wrote the majority opinion – published on Wednesday – alongside Justice Michelle Gordon, Justice James Edelman, Justice Jacqueline Gleeson, and Justice Robert Beech-Jones. Justice Jayne Jagot concurred with the majority’s orders, while Justice Simon Steward was the lone dissenter.

The majority opinion said, “psychiatric injury is an illness which is a different type of damage from mere mental distress”. It noted a person’s employment “is usually one of the most important things in his or her life”.

“‘It gives not only a livelihood but an occupation, an identity and a sense of self-esteem.’ An unfair process of termination for alleged misconduct could affect all three of those interests,” the majority wrote.

They noted “a great deal of water has passed under the bridge of Addis in the United Kingdom” in the last 100 years, indicating it had been “overtaken” by other legislation and case law that subsequently could not be “transplanted to Australia”.

Harben, a workplace relations advisor, said the law had evolved faster in the UK compared to Australia, but there may be “no good reason” for that.

“Sometimes it’s just the right case at the right time coming along with the right facts,” he said.

Arnold Thomas Becker senior associate Nick Korkliniewski, who represented Elisha, said his client’s employer should have followed their own disciplinary procedures if they wanted to sack him.

In a statement, Korkliniewski said: “Community expectations around rights to psychological safety at work and the de-stigmatisation of psychological injury means that the time was right for the law to recognise the requirement of an employer to consider their employee’s psychological health in the course of investigative and disciplinary processes.”

Vision Australia have been contacted for comment.

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